Tuesday, July 3, 2007

Software developers post dynamic export sales

Recent studies indicate that the outsourcing of IT jobs from the West to Ukraine, primarily software development, has become one of the most dynamic segments of the Ukrainian economy.

However, industry insiders say that problems such as a lack of state support and qualified programmers is keeping the country dependent on less lucrative orders from abroad.

The Ukrainian branch of the United States-based outsourcing corporation TechnoPark Corp announced in a Jan. 18 press release that Ukraine's IT industry exports last year grew 60 percent year-on-year to $280 million, while growth of the overall IT market totaled only 25-30 percent.

TechnoPark said that software development makes up 8-9 percent of the entire IT market in Ukraine, but insiders say the lion's share of exports is software developed for Western clients through outsourcing contracts. Still, insiders caution that official figures designating how much work was done in dollars shows only a portion of the true picture, as much of the work is done under the table and remains unrecorded.

According to Ukraine's State Statistics Committee, the software development market in Ukraine grew from about $90 million in 2001 to $260 million in 2005.

But some estimates suggest Ukrainian programmers could have been churning out in excess of $1 billion in software for foreign clients annually in recent years.

Oleg Babykin, projects manager with Kyiv-based PR2 marketing communications agency, said the fact that Ukraine is culturally closer to Europe and that Ukrainian software developers are highly dependable accounts for the attraction of Western clients.

According to Babykin, Ukraine rates third, after India and Russia, in terms of the attractiveness of its IT outsourcing for countries such as the US, Germany, the Netherlands, France, Israel, Denmark and Finland.

But, in terms of the global software development market, which some estimates as large as $50 billion, Ukraine's share is currently estimated to be small, with India picking up much of the big so-called offshore programming contracts.

Volodymyr Kolomiyets, head of analytical services with Softline, a Kyiv-based software development company, said Ukraine has a relatively advanced telecommunication infrastructure and boasts as many as 55,000 highly qualified IT specialists, including programmers, analysts and managers. But, he added, state support is inadequate.

Andriy Bezgubenko, president of the Kyiv-based IT consulting company E-Consulting, said one of the sorest areas of insufficient support is in education.

Bezgubenko said Ukraine still doesn't have enough qualified programmers, and educational institutions are turning out more and more ill-prepared students.

Bezgubenko said Ukraine's IT outsourcing is primarily attractive to leading Western companies due to its cheapness. Ukrainian developers, for example, do not demand medical insurance or unemployment benefits, he said.

A Western customer would normally apply to a well-known Western software developer, called an "integrator, " Bezgubenko explained. And the integrator then hires cheap outsourcing programmers and developers in Ukraine, without the customer's knowledge.

As a result, Ukrainian developers do approximately 80 percent of the work and get only 10 percent of the real cost of this work, according to Bezgubenko.

"If our IT developing industry were good enough, we would see world-renowned software products [being made here]. But I don't see them," he added.

In addition, Bezgubenko said, 80 percent of Ukraine's IT market is in the shadows and thus it's hard to say who's doing what.

Source : http://www.offshoringtimes.com/

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